By Ray Birch
CINCINNATI—The COVID-19 crisis is having a big impact on leasing. Swapalease.com is reporting a 66% increase in customers seeking to exit a lease in April—and that’s right after leasing reached record levels to start the year. But the reason some people are looking to get out of a lease may not be the reason may assume.
J.D. Power reported leasing comprised 52% of captive lenders’ new retail business in the first two months of the year, well above the 31% level leasing represented at the close of 2019.
Scot Hall, executive vice president of Swapalease.com, told CUToday.info the company asks each consumer that uses its site why they want to exit their lease, and the primary reason in its most recent surveys has been financial concerns.
“The pandemic certainly has consumers rethinking things right now and they are uncertain about the future,” said Hall.
Three Reasons
Hall said consumers come to Swapalease.com—which connects consumers who want to exit a lease with others who want to pick one up, typically, a shorter-term lease—for three main reasons.
“They tell us either that want to get out of a lease and get into a different car. They tell us they have had a lifestyle change, such as a young couple who drives a convertible only to learn the stork is on the way and want a more practical car. And then they tell us they have financial reasons,” explained Hall.
Hall said Swapalease.com in the past has seen both positive and negative financial reasons in consumers who are seeking to exit a lease.
“They get a promotion and want a higher series model BMW, for example,” said Hall. “But today, what consumers are telling us, those 66%, is they have financial concerns—concerns about their financial future. This is a very significant jump.”
Not Just Financial Troubles
Hall suggested not all consumers in that 66% are going through a financial hardship due to losing their job from the pandemic. He noted leasing customers tend to have better credit than the average borrower, higher education levels, and “more financial wherewithal.” Hall said many could be seeking to exit a lease just to get their personal balance sheet in better order.
“I think some of what we're seeing is leasing clients may be a little more proactive than many of your average folks out there and are thinking, ‘What am I going to do if this this pandemic goes on a long time, say through the summer or further?’ Not all of these people, I think, are in an emergency situation right now and are considering their options as the economy continues to decline.”
What these consumers are choosing to do when they dump their lease is anyone’s guess, according to Hall, who offered his hypothesis.
“I think the answers are geographically based,” he said. “We do a lot of business in the greater New York City area, and my speculation is a client like that might just be getting out of a car altogether. Now, somebody in Midwest might have a couple cars and maybe they're going to try to get by with one less. Or, they will move into a cheaper vehicle. There is no one-size-fits-all answer here.”
The Forecast
What does all this mean for the future of leasing? Hall suggested that if the shutdown of the country is fairly short, consumers could see some great leasing—and purchase—deals from automakers.
“I think we may see some of the best deals come out of the manufacturers that we have seen in a long time,” said Hall. “They are going to have to make up for a lot of lost business during the shutdown.”
Scot Hall
Addressing the record number of lease deals from the start of the year, Hall said he believes a shift is happening, with leasing appealing to more than those looking for luxury cars.
“Leasing has been at the 50% level for many years with luxury cars,” noted Hall. “What's happening now is the demand for leasing is dropping down to the more everyman car level.”
In addition, Hall suggested that with the eventual lifting of stay-at-home orders there could be a pent-up demand for leasing, as many lease owners won’t be able to return their leased vehicle during the shutdown.
“Some of these cars can’t be taken back right now, with dealerships closed or having skeleton crews,” said Hall. “A lot of these people want to stay on the leasing cycle, and will be moving once things open up again.”
And, as CUToday.info has reported, many of the nation’s auto dealers are telling customers they don’t want them to return their leased cars right now.
http://www.cutoday.info/Fresh-Today/Make-a-U-Turn-Dealers-Automakers-Tell-Lease-Holders-They-Don-t-Want-Cars-Back-Right-Now